Mitigation Planning

Climate Wrap Up 2025 in the Legislature: Cap and Invest

Posted by CLR

AB 1207 (Irwin, 2025): Updates to California’s Cap-and-Trade Program

California enacted AB 1207 in 2025 to extend and update the state’s greenhouse gas cap-and-trade program, now referred to in statute as the California Cap-and-Invest Program. The bill was signed by Governor Gavin Newsom on September 19, 2025 and took effect immediately as an urgency statute. Its primary purpose is to extend the program and make several structural adjustments as California moves from early climate targets toward longer-term decarbonization goals.

The most significant change in AB 1207 is the extension of the state’s market-based compliance mechanism through December 31, 2045, with statutory provisions remaining in effect until January 1, 2046. By extending the program beyond the previous statutory sunset, the Legislature provides long-term regulatory certainty for the state’s carbon market and for investments in emissions-reduction technologies. The legislation also formally reflects the policy shift toward describing the program as “Cap-and-Invest,” highlighting that auction revenues are reinvested in climate and clean-energy initiatives across the state.

AB 1207 also updates the statutory framework to align the program with California’s longer-term greenhouse gas reduction targets, rather than focusing primarily on the earlier 2020 emissions goal established in the original Global Warming Solutions Act. The law directs the California Air Resources Board (CARB) to design emissions-reduction regulations and the market-based compliance program to achieve the requirements of more recent statutory targets, ensuring the carbon market continues to support California’s long-term decarbonization strategy.

In addition to extending the program, the legislation makes several targeted policy adjustments. It requires CARB to design regulations—including the distribution of emissions allowances—in a way that gradually transitions program support from natural gas corporations to electrical distribution utilities by 2031, reflecting the state’s broader push toward electrification and minimizing ratepayer impacts. The bill also reinforces environmental justice protections by requiring CARB to ensure that program compliance activities do not disproportionately impact low-income communities.

AB 1207 also modifies the rules governing the use of offset credits in the carbon market. Covered entities may continue to use offsets for a limited share of their compliance obligations, but the bill sets clear limits for future compliance periods and requires that at least half of offsets provide direct environmental benefits in California. In addition, allowances equivalent to the number of offsets used must be removed from the following year’s allowance budget, a mechanism intended to maintain the integrity of the emissions cap.

The legislation further establishes a new California Climate Mitigation Fund to receive revenues generated if additional allowances are sold at the program’s price ceiling. Funds may be used for measures that reduce household energy costs, including consumer rebates, incentives for zero-emission vehicles, and investments in energy-efficient housing. AB 1207 also modifies certain provisions governing the distribution of utility climate credits, including directing that residential bill credits be applied during the highest-billing months of the year to maximize affordability benefits for customers.

Overall, AB 1207 preserves the core structure of California’s carbon market while extending its time horizon and updating several program design elements. By aligning the program with the state’s long-term climate targets and refining how allowances, offsets, and revenues are managed, the legislation signals that a market-based compliance mechanism will remain a central component of California’s climate policy framework through mid-century.

Why California Needs Emission Budgets to Close Its Climate Blind Spot

Posted by CLR

California has built a global reputation for climate leadership, with some of the most ambitious policies in the world. But even a leader can’t steer effectively without a clear dashboard. Right now, California’s climate policy suffers from a major transparency gap — a lack of clear, public accounting that connects its reduction targets to the total carbon budget consistent with the Paris Agreement.

The Missing Link: From Targets to Trajectory

California tracks annual emissions and sets percentage reduction goals for 2030 and 2045, but those figures tell us little about whether the state’s pathway actually aligns its targets and with limiting global warming to 1.5 °C. Without a defined emission budget, there’s no way to see whether California’s planned reductions add up to its fair share of the global carbon limit and are aligned with its targets — or whether it’s quietly overspending its climate allowance.

Why Transparency Matters More Than Ever

Other jurisdictions, like the United Kingdom and Germany, use national CO₂ budgets to quantify the relationship between near-term policies and long-term temperature goals. That allows scientists, policymakers, and the public to detect both implementation gaps (whether policies are on track) and ambition gaps (whether those policies are strong enough).

In California, we can’t even begin that assessment. The data exist, but they aren’t organized or communicated in a way that links the state’s emissions to a finite carbon limit. As a result, we have a sophisticated set of tools — cap-and-trade, renewable mandates, vehicle standards — without a clear sense of whether they collectively keep us within climate safety bounds.

What a Carbon Budget Would Add

A CO₂ budget translates the abstract Paris temperature targets into a concrete number: the total amount of emissions California can produce while still contributing fairly to global goals. This benchmark doesn’t replace existing policies — it grounds them.
By defining that total, the state could:

  • Evaluate whether its targets are ambitious enough and whether implementation is aligned with the target.
  • Track whether real-world emissions are staying within the budget.
  • Communicate transparently how each sector contributes to overall progress.

Why California Needs Emission Budgets to Close Its Climate Blind Spot

California has built a global reputation for climate leadership, with some of the most ambitious policies in the world. But even a leader can’t steer effectively without a clear dashboard. Right now, California’s climate policy suffers from a major transparency gap — a lack of clear, public accounting that connects its reduction targets to the total carbon budget consistent with the Paris Agreement.

From Leadership to Clarity

California doesn’t need to assume it’s falling short — but it does need to know. Adopting a system of periodic emission budgets would transform guesswork into accountability, allowing the public and decision-makers to see, year by year, whether the state’s climate spending stays within planetary means.

If California wants to remain a climate leader, it should lead not just in ambition, but in clarity. Emission budgets — regularly updated and publicly tracked — are how we make that leadership measurable.

California Senate Hearings on Cap and Trade

Posted by CLR

On February 13, 2024, the Senate Environmental Quality joined the Senate Budget and Fiscal Review Subcommittee No. 2 on Resources, Environmental Protection and Energy, met to consider the new proposed “Cap and Trade Rulemaking” and to examine more closely why the state’s current cap-and-trade program is not on track to drive environmental justice and affordability outcomes by 2030. Staff produced a background paper to summarize the concerns. You can watch the hearing here.

Open for Public Comment: 2023 Annual Report of the Independent Emissions Market Advisory Committee Open for Public Comment: 2023

Posted by CLR

The Independent Emissions Market Advisory Committee (IEMAC) is seeking public comment on its Sixth Annual Report to the California Air Resources Board (CARB) and the Joint Legislative Committee on Climate Change Policies on the environmental and economic performance of California’s carbon market
and other relevant climate policies.

Public comments should be sent to iemac@calepa.ca.gov by February 26.

CARB’s Scoping Plans

Posted by CLR

The California Scoping Plan refers to a comprehensive strategy developed by the California Air Resources Board (CARB) to outline measures and actions aimed at reducing greenhouse gas emissions in the state. The plan is a key component of California’s commitment to addressing climate change and meeting its statutory targets for reducing emissions.

The 2008 Scoping Plan, which was actually finalized in 2009, was the first such plan. As required by statute, the Scoping Plan has been updated every five years by CARB since then.

The 2022 Scoping Plan can be found here: 2022 Scoping Plan for Achieving Carbon Neutrality

The 2017 Scoping Plan can be found here: California’s 2017 Climate Change Scoping Plan

The 2013 Scoping Plan can be found here: First Update to the Climate Change Scoping Plan: Building on the Framework Pursuant to AB 32: The California Global Warming Solutions Act of 2006

The 2008 Scoping Plan can be found here: Climate Change Scoping Plan: A Framework for Change Pursuant to AB 32 The California Global Warming Solutions Act of 2006

Legislative Analyst’s Office (LAO): Assessing California’s Climate Policies–The 2022 Scoping Plan Update

Posted by CLR

The Legislative Analyst’s Office (LAO) recently evaluated the California Air Resources Board’s (CARB) 2022 Scoping Plan Update, which outlines the state’s plan for reducing greenhouse gas (GHG) emissions. The report can be found here: Assessing California’s Climate Policies—The 2022 Scoping Plan Update. The Scoping Plan Update aims to achieve a 48% reduction in GHG emissions below the 1990 level by 2030 and at least an 85% reduction by 2045. However, the LAO’s assessment found that the plan lacks a clear strategy for meeting the 2030 GHG goals, as it does not specify the specific policies it will implement to achieve these reductions. The report provides recommendations for legislative next steps. 

Specifically, the LAO recommended that the California legislature should work with CARB to develop a more detailed plan that outlines specific policies and measures to achieve the 2030 GHG reduction goals. Additionally, the report suggested that the legislature should consider providing oversight to ensure that the plan is effectively implemented and that the state is on track to meet its GHG reduction targets.